TNK-BP (Russia) 2008
This case portrays the highly uncertain scenario facing BP in Russia at the end of 2007.
In the midst of unraveling relations with its cooperative partner and undesirable host
government practices, ideal strategic conditions are implausible.
In order to maximize
outcomes under such imperfect circumstances, BP's senior management needs to fully
assess the situational risks, understand the dynamics and motivations driving stakeholder
behavior, and establish a plan which can appeal to all interested parties.
As BP devises a strategy for managing business holdings in Russia, what risks
does the company face?
What important motivational factors are underlying the behavior of prominent
What steps should BP take to protect its investments and ongoing global
Due to globalization, there is an increasing economic interdependence across
The flow of goods, financial capital, and knowledge among countries is
growing, and international performance standards are on the rise.
promising opportunities are associated with the emergence of the global economy, but
they are not without related risks.
BP is the world's third largest oil and gas concern, holding a diverse range of
international pipeline, refining, chemical, and retail assets.
In the oil and gas industry,
competitiveness depends on continually increasing oil and gas production and replacing
Reserves are limited globally, which restricts options available to industry
The size, importance, and potential of the oil industry in Russia is a big
draw for companies like BP -- especially as the company tries to match the financial
performance of mega-rivals, ExxonMobile and Shell.
To access key supplies of raw
material, BP has taken steps to secure important resources within Russia.
But, despite the
strengths of its Russian assets and operations, the company has not been able to meet the
growth level it is seeking.
Oil production is actually decreasing in Russia due to:
aging and poorly-maintained oil fields,
the confiscatory tax and regulatory regime, and
deficient investments (both Russian and foreign) in new exploration and
In Russia, much of the risk faced by BP is concentrated in the political and legal segment
of the general environment.
Oversight of vital natural resources is intense, and
government policy is volatile.
Revenues are negatively impacted by heavy export duties
TNK-BP - 1